Peter Thiel Is Teaching A Class At Stanford About Startups, And We've Got Notes

Students in Peter Thiel's CS183 class can expect to learn about
the following, according to the
class description:

Inner accounts from the early days of startups including
PayPal,
Google and
Facebook
will be used as case studies. The class will be taught by
entrepreneurs who have started companies worth over $1B
and VCs who have invested in startups including
Facebook and Spotify.
Students can expect to be proficient in the core skills critical
to the founding and growing of a tech company upon completion of
this course.

Not a Stanford student? Couldn't get into the class?

Fortunately, Stanford law student Blake Masters is doing a good
job of blogging about the class. Masters had a short stint at The
Founders
Fund, the firm Thiel started, during August 2011 and October
2011.

Looking at Masters' notes, we highlighted some of the most
interesting parts. (The quotes are from Masters, not Thiel
directly.)

Why Thiel is teaching: "Humanities
majors may well learn a great deal about the world. But they
don’t really learn career skills through their studies.
Engineering majors, conversely, learn in great technical
detail. But they might not learn why, how, or where they should
apply their skills in the workforce. The best students,
workers, and thinkers will integrate these questions into a
cohesive narrative. This course aims to facilitate that
process."

The computer industry is the only industry to live up
to the hope that technological progress would advance:
"Computers have been the happy exception to recent tech
deceleration. Moore’s/Kryder’s/Wirth’s laws have largely held
up, and forecast continued growth. Computer tech, with
ever-improving hardware and agile development, is something of
a model for other industries."

You can't understand startups until you understand what
it was like in the 90s: "There is a keen analogue
between the cultural intensity of the ‘60s and the
technological intensity of the 1990s. But today’s college and
perhaps even graduate students, like the toddler in 1969, may
have been too young to have viscerally experienced what was
going on back in 1999. To participate in the dinner table
conversation—to be able to think and talk about businesses and
startups today in 2012—we must get a handle on the history of
the ‘90s. It is questionable whether one can really understand
startups without, say, knowing about Webvan or recognizing the
Pets.com
mascot."

No... most of the 90s wasn't part of the dot com
bubble.

There were a lot of sketchy people during that time
though: "All the parties, money, and IPO success
stories made for lots of sketchy businesses. Those businesses
were funded by sketchy VCs and run by sketchy
entrepreneur-salespeople. Since everybody was running around
saying pretty crazy things, it became increasingly hard to tell
who was too sketchy and who wasn’t. To avoid being drawn in by
slick salesmen, Max
Levchin developed what he called the aura test: you listen
to someone for 15 seconds and then decide if he has a good
aura. If so, you continue to listen. If not, you walk away.
It’s not hard to imagine that companies who employed some
version of the aura test were more likely to survive the mania
than those who didn’t."

So if you're starting a startup in 2012, Thiel gives
this advice: "To understand businesses and startups in
2012, you have to do the truly contrarian thing: you
have to think for yourself. The question of what is valuable is
a much better question than debating bubble or no bubble. The
value question gets better as it gets more specific: is company
X valuable? Why? How should we figure that out? Those are the
questions we need to ask."

Being first doesn't mean you will win:
"Grandmaster José Raúl Capablanca put it well: to succeed, 'you
must study the endgame before everything else.'"

Oh, on valuations. Take PayPal, for
example: "PayPal is illustrative. 27 months in,
its growth rate was 100%. Everybody knew that rate would
decelerate, but figured that it would still be higher than the
discount rate. The plan was that most of the value would come
around 2011. Even that long-term thinking turned out to
undershoot; the discount rate has been lower than expected, and
the growth rate is still at a healthy 15%. Now, it looks like
most of PayPal’s value won’t come until in 2020."